EDITORIAL: Financial results puncture optimism

Almost all publicly listed companies have released their latest quarterly revenue data in the past two weeks, with many of them posting weaker-than-expected results for the first three months, suggesting that many firms were too optimistic about the state of the global economy when they made their forecasts at the beginning of the year.

For instance, many firms in the electronics sector last month saw revenues slide 8 percent on average from a year earlier and witnessed a 3 percent decline in their first-quarter sales compared with the same period of last year, while other listed companies, including those in the traditional manufacturing and banking sectors, on average reported a 7 percent fall in sales for last month from a year ago, and an average 2 percent drop in the first three months of the year.

Government officials and many economists have said that the nation’s economy bottomed out in the final quarter of last year and started rebounding in the first quarter of this year, but the reality is that the recovery is slower than expected. The latest exports data offered yet more evidence of this sluggish recovery as it missed the government’s growth target.

According to a report released by the Ministry of Finance on Monday, exports rose 3.3 percent year-on-year to US$27.23 billion last month, after growing 2.9 percent in the combined January-to-February period. While this suggests that exports gathered momentum last month, the consolidated data from the first three months showed that outbound shipments grew just 2.4 percent from a year earlier to US$72.64 billion, less than the 4.7 percent growth forecast by the government in February, which ministry officials attributed primarily to the weakness of the US and EU economies.

There are many factors that have led investors to question the sustainability of the current global economic recovery in the first few months of the year and made them wonder what the economic prospects are for the months ahead. These factors include China’s recent policy shift toward balanced development rather than a narrow focus on rapid economic growth, a slew of disappointing economic data from the US last week, as well as the issue of persistent recession in most parts of Europe, as exemplified by the recent financial turmoil in Cyprus.

It seems the early optimism about the global economy is beginning to fade after the disappointing first-quarter results and one should still be concerned about the global outlook, because any pick-up in growth is likely to be restrained as economic activity struggles to regain its pre-global financial crisis momentum.

This cautious outlook is underlined by the existence of uncertainties in the short term — such as aggressive monetary easing in Japan and ongoing tensions on the Korean Peninsula — and long term, such as the continued economic sluggishness in the US and the ongoing debt problem in the eurozone.

Last week, the Asian Development Bank forecast that Taiwan’s GDP growth would reach 3.5 percent this year, compared with the 3.59 percent projected by the government in February. However, the bank said in its Asian Development Outlook report that Taiwan “should continue to maintain adequate policy flexibility to respond to economic challenges” that may be posed by a slowdown in China or a weaker Japanese yen.